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Search Equilibrium, Production Parameters and Social Returns to Education: Theory and Estimation

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  • Christian Holzner
  • Andrey Launov

Abstract

We introduce skill groups and different production technologies into the Burdett- Mortensen model of on the job search. Supermodularity of the different skill groups in the production process leads to a positive intra-firm wage correlation between skill groups. Increasing returns to scale allow the theoretical earnings density to be unimodal with a long right tail even in the absence of productivity dispersion. We perform the structural estimation the model and evaluate the effect that arises from the marginal shift of the skill structure towards larger fraction of high-skilled workers. Our estimates of the production parameters demonstrate economy-wide increasing returns to scale.

Suggested Citation

  • Christian Holzner & Andrey Launov, 2005. "Search Equilibrium, Production Parameters and Social Returns to Education: Theory and Estimation," ifo Working Paper Series 23, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:ifowps:_23
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    References listed on IDEAS

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    Cited by:

    1. Garloff, Alfred, 2008. "Minimum wages, wage dispersion and unemployment : a review on new search models," IAB-Discussion Paper 200833, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

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    More about this item

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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